UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4395
Smith Barney Muni Funds
(Exact name of registrant as specified in charter)
125 Broad Street, New York, NY 10004
(Address of principal executive offices) (Zip code)
Robert I. Frenkel, Esq.
Smith Barney Fund Management LLC
300 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 451-2010
Date of fiscal year end: March 31
Date of reporting period: September 30, 2003
ITEM 1. REPORT TO STOCKHOLDERS.
The Semi-Annual Report to Stockholders is filed herewith.
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SMITH BARNEY
MUNI FUNDS
CALIFORNIA MONEY
MARKET PORTFOLIO
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SEMI-ANNUAL REPORT | SEPTEMBER 30, 2003
[LOGO] Smith Barney
Mutual Funds
Your Serious Money. Professionally Managed.(SM)
Your Serious Money. Professionally Managed.(R) is a registered service mark
of Citigroup Global Markets Inc.
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NOT FDIC INSURED o NOT BANK GUARANTEED o MAY LOSE VALUE
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WHAT'S INSIDE
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Letter from the Chairman ................................................. 1
Schedule of Investments .................................................. 3
Statement of Assets and Liabilities ...................................... 13
Statement of Operations .................................................. 14
Statements of Changes in Net Assets ...................................... 15
Notes to Financial Statements ............................................ 16
Financial Highlights ..................................................... 21
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LETTER FROM THE CHAIRMAN
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[PHOTO OMITTED]
R. JAY GERKEN, CFA
Chairman, President and
Chief Executive Officer
Dear Shareholder,
In an effort to jump-start a weak economy, the Federal Reserve reduced
short-term interest rates again in late June, driving the federal funds rate(i)
to just 1%, its lowest level since the Eisenhower Administration. During this
declining-rate environment, yields on fixed-income securities continued to
decline from April through June. Meanwhile, many states, including California,
have been grappling with budget deficits brought on by the faltering economy,
layoffs and declining incomes -- all leading to lower tax revenues.
Shortly after the Fed eased rates in June, long-term bond yields experienced a
sharp reversal over the summer. However, the yields on shorter-term municipal
fixed-income securities continued to fall and eventually stabilized throughout
the remainder of the period.
In this environment, the fund performed as follows:
Smith Barney Muni Funds:
California Money Market Portfolio's Performance
As of September 30, 2003, the seven-day current yield and seven-day effective
yield, which reflects compounding, of Class A shares of the fund were both
0.49%.(1) These numbers are the same due to rounding. The seven-day effective
yield is calculated similarly to the seven-day current yield but, when
annualized, the income earned by an investment in the fund is assumed to be
reinvested. The effective yield typically will be slightly higher than the
current yield because of the compounding effect of the assumed reinvestment.
Please note that your investment is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation ("FDIC") or any other government agency.
Although the fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in a money market fund. Certain
investors may be subject to the federal Alternative Minimum Tax, and state and
local taxes may apply. Capital gains, if any, are fully taxable. Please consult
your personal tax adviser.
(1) The seven-day current yield and seven-day effective yield, which reflects
compounding of Class Y shares of the fund were both 0.63%. Performance for
all of the fund's share classes can be found in the Financial Highlights
section in this report.
1 Smith Barney Muni Funds | 2003 Semi-Annual Report
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CLASS A SHARES' YIELDS AS OF SEPTEMBER 30, 2003
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Seven-day current yield 0.49%
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Seven-day effective yield 0.49%
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These numbers are the same due to rounding. The seven-day effective yield is
calculated similarly to the seven-day current yield but, when annualized, the
income earned by an investment in the fund is assumed to be reinvested. The
effective yield typically will be slightly higher than the current yield because
of the compounding effect of the assumed reinvestment. Please note that your
investment is neither insured nor guaranteed by the Federal Deposit Insurance
Corporation ("FDIC") or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in a money market fund.
Certain investors may be subject to the federal Alternative Minimum Tax, and
state and local taxes may apply. Capital gains, if any, are fully taxable.
Please consult your personal tax advisor.
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At times of uncertainty such as these, investments in short-term fixed-income
securities are an effective means of diversification in an overall investment
portfolio. And municipal securities can provide income free from federal, and
sometimes state and local, income taxes. Accordingly, we believe it is important
to develop and stick with a long-range plan. Please work closely with your
financial adviser to determine your proper asset allocation based on your
risk/reward profile to help you pursue your long-term financial goals.
As always, thank you for entrusting your assets to us. We look forward to
helping you continue to meet your financial goals.
Sincerely,
/s/ R. Jay Gerken
R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
October 9, 2003
The information provided in this letter by the Investment Adviser is not
intended to be a forecast of future events, a guarantee of future results or
investment advice. Views expressed may differ from those of the firm as a whole.
Portfolio holdings are as of September 30, 2003 and are subject to change.
Please refer to pages 3 through 10 for a list of the fund's holdings.
(i) The federal funds rate is the interest rate that banks with excess
reserves at a Federal Reserve district bank charge other banks that need
overnight loans.
2 Smith Barney Muni Funds | 2003 Semi-Annual Report
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Schedule of Investments (unaudited) September 30, 2003
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FACE
AMOUNT RATING(a) SECURITY VALUE
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ABAG Finance Authority for Nonprofit Corp.:
$ 7,000,000 A-1+ Lease Pass-Through Obligation Series A 1.10% VRDO $ 7,000,000
10,545,000 A-1+ Lucile Salter Packard Children's Hospital Project
AMBAC-Insured 1.07% VRDO 10,545,000
2,300,000 A-1+ MFH Amber Court Apartments Series A 1.10% VRDO 2,300,000
Alameda Contra Costa Schools Finance Authority
(Capital Improvements Financing Project) COP:
5,350,000 A-1 Series D 1.08% VRDO 5,350,000
1,600,000 A-1 Series E 1.08% VRDO 1,600,000
2,245,000 VMIG 1* Alvord USD Finance Corp. COP 1.10% VRDO 2,245,000
6,180,000 A-1+ Anaheim Housing Authority MFH Park Vista Apartments
1.15% VRDO AMT 6,180,000
5,300,000 A-1 Anaheim UHSD COP FSA-Insured 1.10% VRDO 5,300,000
8,000,000 A-1+ Auburn USD COP FSA-Insured 1.05% VRDO 8,000,000
35,760,000 A-1+ Bay Area Toll Authority CA Toll Bridge Revenue San Francisco
Bay Area Series C AMBAC-Insured 1.05% VRDO 35,760,000
California Cities Home Ownership Authority Lease
Purchase Program:
34,050,000 A-1+ Series A 1.10% VRDO 34,050,000
5,650,000 A-1+ Series B 1.10% VRDO 5,650,000
5,000,000 A-1+ California EFA University of Southern California Series C
1.05% due 3/19/04 5,000,000
California Health Facilities Finance Authority:
Catholic Healthcare MBIA-Insured:
1,900,000 A-1+ Series B 1.10% VRDO 1,900,000
2,300,000 A-1+ Series C 1.10% VRDO 2,300,000
Scripps Health Care:
6,300,000 A-1 Series A 1.05% VRDO 6,300,000
8,000,000 A-1 Series B MBIA-Insured 1.07% VRDO 8,000,000
16,285,000 A-1+ Southern California Presbyterian Homes MBIA-Insured
1.08% VRDO 16,285,000
California HFA:
Home Mortgage:
1,700,000 A-1+ Series F 1.08% VRDO AMT 1,700,000
20,100,000 A-1 Series U MBIA-Insured 1.10% VRDO AMT 20,100,000
MFH:
3,000,000 A-1+ Series C 1.30% VRDO AMT 3,000,000
5,700,000 A-1+ Series E 1.13% VRDO AMT 5,700,000
1,200,000 A-1+ Series F 1.08% VRDO AMT 1,200,000
46,850,000 A-1+ Series D FSA-Insured 1.10% VRDO AMT 46,850,000
California Infrastructure & Economic Development Bank:
18,500,000 A-1+ Academy of Motion Pictures AMBAC-Insured 1.03% VRDO 18,500,000
4,000,000 NR+ IDR River Ranch 1.10% VRDO AMT 4,000,000
See Notes to Financial Statements.
3 Smith Barney Muni Funds | 2003 Semi-Annual Report
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Schedule of Investments (unaudited) (continued) September 30, 2003
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FACE
AMOUNT RATING(a) SECURITY VALUE
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ISO MBIA-Insured:
$ 12,200,000 A-1+ Series A 1.10% VRDO $ 12,200,000
12,325,000 A-1+ Series C 1.10% VRDO 12,325,000
2,400,000 A-1 Roller Bearing of America 1.15% VRDO AMT 2,400,000
California PCFA:
PCR:
110,000 A-1+ Santa Clara Valley Disposal Co. Series A
1.10% VRDO AMT 110,000
7,400,000 P-1 Sierra Pacific Industries Project 1.00% VRDO 7,400,000
Solid Waste:
4,270,000 NR+ Alameda County Industrial Project Series A
1.15% VRDO AMT 4,270,000
4,360,000 NR+ Athens Disposal Inc. Project Series A 1.15% VRDO AMT 4,360,000
5,185,000 NR+ Athens Services Project 1.15% VRDO AMT 5,185,000
1,660,000 NR+ BLT Enterprises Series 99A 1.15% VRDO AMT 1,660,000
7,155,000 NR+ Blue Line Transfer Project 1.15% VRDO AMT 7,155,000
15,725,000 NR+ Edco Disposal Corp. Project 1.15% VRDO AMT 15,725,000
2,755,000 NR+ Garaventa Enterprises Inc. 1.15% VRDO AMT 2,755,000
10,735,000 A-1 Norcal Waste System Inc. 1.20% VRDO AMT 10,735,000
8,675,000 NR+ Sierra Pacific Industries Inc. Project 1.10% VRDO AMT 8,675,000
595,000 NR+ Sonoma Compost Co. Project Series A
1.15% VRDO AMT 595,000
1,300,000 NR+ South County Sanitary Services Series 99A
1.20% VRDO AMT 1,300,000
5,000,000 A-1+ Waste Management Inc. Project Series A
1.15% VRDO AMT 5,000,000
3,100,000 NR+ Willits Project Series A 1.15% VRDO AMT 3,100,000
60,000,000 SP-1+ California School Cash Reserve Program Series A
2.00% due 7/6/04 60,499,478
5,750,000 A-1 California School Facilities Finance Corp. COP Series C
1.05% VRDO 5,750,000
5,280,000 A-1 California State Department of Veteran Affairs MSTC
Series 98-47 AMBAC-Insured PART 1.10% VRDO AMT 5,280,000
California State Department of Water Resources:
7,100,000 A-1+ Series C-5 1.07% VRDO 7,100,000
10,000,000 A-1+ Series C-6 AMBAC-Insured 1.07% VRDO 10,000,000
2,000,000 A-1+ Series C-7 FSA-Insured 1.15% VRDO 2,000,000
33,200,000 A-1 Series C-11 1.05% VRDO 33,200,000
7,200,000 A-1+ Series C-14 1.10% VRDO 7,200,000
45,300,000 A-1 Series C-15 1.05% VRDO 45,300,000
6,145,000 A-1+ Series I 0.85% due 10/2/03 TECP 6,145,000
California State GO MSTC PART:
24,495,000 A-1 Series 2000-96 AMBAC-Insured 1.10% VRDO 24,495,000
3,700,000 A-1+ Series SGA-7 FSA-Insured 1.10% VRDO 3,700,000
See Notes to Financial Statements.
4 Smith Barney Muni Funds | 2003 Semi-Annual Report
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Schedule of Investments (unaudited) (continued) September 30, 2003
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FACE
AMOUNT RATING(a) SECURITY VALUE
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$ 29,000,000 A-1+ Series SGA-119 FGIC-Insured 1.20% VRDO $ 29,000,000
30,300,000 A-1+ Series SGA-136 XLCA-Insured 1.20% VRDO 30,300,000
25,000,000 SP-1+ California State Revenue Anticipation Warrants Series B
2.00% due 6/16/04 25,154,226
California Statewide Communities Development Authority IDR:
2,600,000 A-1+ A&B Die Casting Corp. Series A 1.15% VRDO AMT 2,600,000
4,000,000 A-1+ Aegis Assisted Living Properties Series Y 1.15% VRDO AMT 4,000,000
11,550,000 VMIG 1* Concordia University Project Series A 1.21% VRDO 11,550,000
5,000,000 VMIG 1* MERLOT Series E FSA-Insured PART 1.09% VRDO 5,000,000
MFH Series A:
1,625,000 VMIG 1* Nonprofit's Insurance Alliance 1.10% VRDO 1,625,000
3,165,000 A-1+ Oakmont of Danville-Sunrise Project 1.15% VRDO AMT 3,165,000
10,860,000 A-1 California Transitional Finance Authority FSA-Insured
1.03% VRDO 10,860,000
2,350,000 A-1 Carlsbad USD School Facility Bridge Funding Program
FSA-Insured 1.10% VRDO 2,350,000
3,331,000 VMIG 1* Clipper Tax Exempt Trust COP Series 98-9 AMBAC-Insured
PART 1.18% VRDO AMT 3,331,000
1,700,000 VMIG 1* Concord MFH Bel Air Apartments Issue A 1.10% VRDO 1,700,000
3,500,000 VMIG 1* Contra Costa Water District Munitops Series 99-8
FGIC-Insured PART 1.75% due 10/29/03 3,500,000
7,675,000 A-1+ Covina RDA MFH Shadowhills Apartments Series A
FNMA-Insured 1.08% VRDO 7,675,000
9,230,000 A-1+ Daly City HFA MFH Serramonte Del Ray Series A
FNMA-Insured 1.06% VRDO 9,230,000
1,150,000 A-1+ Dublin San Ramon Services District Sewer COP
MBIA-Insured 1.05% VRDO 1,150,000
East Bay MUD Waste Water:
29,000,000 A-1+ 0.85% due 10/6/03 TECP 29,000,000
11,900,000 A-1+ 0.85% due 10/11/03 TECP 11,900,000
Eastern Municipal Water District and Sewer Revenue Series B:
1,800,000 A-1+ FGIC-Insured 1.05% VRDO 1,800,000
20,000,000 A-1+ MBIA-Insured 1.10% VRDO 20,000,000
5,400,000 VMIG 1* Elsinore Valley Municipal Water District COP Series A
FGIC-Insured 1.05% VRDO 5,400,000
3,600,000 VMIG 1* Escondido Community Development Authority COP
1.10% VRDO AMT 3,600,000
2,650,000 A-1+ Fresno Sewer Series A FGIC-Insured 1.05% VRDO 2,650,000
5,000,000 A-1+ Glendale COP Police Building Project 1.05% VRDO 5,000,000
Golden Empire School Finance Authority Kern High School
District:
10,400,000 A-1+ 1.03% VRDO 10,400,000
5,100,000 A-1+ Series B 1.00% VRDO 5,100,000
6,400,000 A-1+ Hayward Housing Authority Barrington Hills Series A
1.10% VRDO 6,400,000
See Notes to Financial Statements.
5 Smith Barney Muni Funds | 2003 Semi-Annual Report
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Schedule of Investments (unaudited) (continued) September 30, 2003
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FACE
AMOUNT RATING(a) SECURITY VALUE
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$ 2,750,000 VMIG 1* Hayward MFH Tennyson Gardens Apartments Series A
1.20% VRDO AMT $ 2,750,000
Hillsborough COP:
3,100,000 NR+ Series A 1.08% VRDO 3,100,000
Water & Sewer Systems Projects:
15,000,000 A-1+ Series A 1.08% VRDO 15,000,000
1,600,000 NR+ Series B 1.08% VRDO 1,600,000
7,000,000 VMIG 1* Irvine Improvement Board Assessment District 85-7-I
FSA-Insured 1.05% VRDO 7,000,000
300,000 A-1+ Irvine Ranch Water District Condominiums Buildings
1.20% VRDO 300,000
5,950,000 VMIG 1* Irvine USD Special Tax Community Facilities District No. 01-1
1.20% VRDO 5,950,000
4,200,000 VMIG 1* Livermore COP Capital Projects AMBAC-Insured 1.03% VRDO 4,200,000
5,115,000 A-1 Long Beach Health Facilities Memorial Health Services
Series 91 1.08% VRDO 5,115,000
2,000,000 VMIG 1* Long Beach USD Capital Improvement Project AMBAC-Insured
1.05% VRDO 2,000,000
Los Angeles Capital Asset Lease Corp.:
9,300,000 A-1+ 0.80% due 10/1/03 TECP 9,300,000
14,500,000 A-1+ 0.85% due 11/7/03 TECP 14,500,000
18,600,000 A-1+ 0.85% due 12/1/03 TECP 18,600,000
Los Angeles City Harbor Department:
5,475,000 A-1 0.95% due 11/20/03 TECP AMT 5,475,000
5,775,000 A-1 0.95% due 12/11/03 TECP AMT 5,775,000
3,100,000 A-1+ Los Angeles Community College District Putters Series 216Z
MBIA-Insured PART 1.10% VRDO 3,100,000
5,400,000 VMIG 1* Los Angeles Community RDA MFH Skyline at Southpart
1.08% VRDO 5,400,000
16,000,000 A-1+ Los Angeles Convention & Exhibition Center Authority Lease
Revenue Series B-1 AMBAC-Insured 0.97% due 6/16/04 16,000,000
9,285,000 A-1 Los Angeles County GO MSTC Series 9004 FGIC-Insured
PART 1.13% VRDO 9,285,000
Los Angeles County Housing Authority MFH:
3,000,000 A-1+ Canyon Country Villas Project Series H 1.05% VRDO 3,000,000
200,000 A-1+ Fountain Park Project 1.05% VRDO AMT 200,000
4,300,000 A-1+ Sand Canyon Series F 1.05% VRDO 4,300,000
6,002,000 VMIG 1* Studio Colony Series C 1.11% VRDO 6,002,000
Los Angeles County Metropolitan Transportation Authority
Sales Tax Revenue:
10,000,000 A-1+ MBIA-Insured 1.05% VRDO 10,000,000
2,875,000 VMIG 1* Series 837 PART 1.11% VRDO 2,875,000
Series A:
14,518,000 A-1 0.80% TECP 14,518,000
5,000,000 A-1 0.85% TECP 5,000,000
8,030,000 VMIG 1* Los Angeles County Sanitation District Finance Authority
Series 826 FSA-Insured PART 1.00% VRDO 8,030,000
See Notes to Financial Statements.
6 Smith Barney Muni Funds | 2003 Semi-Annual Report
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Schedule of Investments (unaudited) (continued) September 30, 2003
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FACE
AMOUNT RATING(a) SECURITY VALUE
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$ 38,000,000 SP-1+ Los Angeles County TRAN Series A 2.00% due 6/30/04 $ 38,308,946
Los Angeles Department of Water & Power:
10,290,000 A-1+ Power Systems Series A-1 1.05% VRDO 10,290,000
12,865,000 A-1+ Putter Series 143 PART MBIA-Insured 1.10% VRDO 12,865,000
20,250,000 A-1+ Series B-2 1.05% VRDO 20,250,000
42,000,000 A-1+ Series B-4 1.05% VRDO 42,000,000
10,000,000 A-1 Series B-5 1.05% VRDO 10,000,000
3,300,000 A-1+ Los Angeles MFH Housing Loans to Lenders Series B
1.25% VRDO AMT 3,300,000
25,000,000 SP-1+ Los Angeles USD GO TRAN Series A 2.00% due 7/1/04 25,198,388
12,500,000 A-1+ Los Angeles USD Land Acquisition Program Series D
AMBAC-Insured 1.03% VRDO 12,500,000
3,600,000 A-1+ Los Angeles USD Putters Series 261Z FGIC-Insured PART
1.10% VRDO 3,600,000
Los Angeles Waste Water System:
9,897,500 VMIG 1* Series 318 FGIC-Insured PART 1.08% VRDO 9,897,500
20,000,000 A-1+ Series A 1.25% due 12/5/03 20,000,000
3,000,000 A-1+ Series B 1.25% due 12/5/03 3,000,000
8,000,000 A-1+ Manteca Finance Authority Water Revenue MSTC SGA 147
MBIA-Insured PART 1.10% VRDO 8,000,000
Metropolitan Water District Southern California:
6,900,000 A-1 Series 01-113 FGIC-Insured PART 1.10% VRDO AMT 6,900,000
4,900,000 A-1+ Series B-1 1.20% VRDO 4,900,000
75,000,000 A-1+ Series B-2 1.03% VRDO 75,000,000
16,400,000 A-1+ Series B-2 1.05% VRDO 16,400,000
20,500,000 A-1+ Milpitas MFH Crossing at Montague Series A FNMA-Insured
1.15% VRDO AMT 20,500,000
MSR Public Power Agency San Juan Project:
15,700,000 A-1 Series B AMBAC-Insured 1.10% VRDO 15,700,000
25,045,000 A-1+ Series E MBIA-Insured 1.10% VRDO 25,045,000
16,057,000 NR+ Northern California Transmission Agency
0.85% due 11/3/03 TECP 16,057,000
Oakland Alameda County Coliseum Project:
26,100,000 A-1+ Series C-1 1.02% VRDO 26,100,000
33,800,000 A-1+ Series C-2 1.05% VRDO 33,800,000
3,000,000 VMIG 1* Oakland MERLOT Series M AMBAC-Insured PART
1.09% VRDO 3,000,000
9,500,000 MIG 1* Oakland TRAN 2.00% due 7/29/04 9,570,710
Orange County Apartment Development:
5,275,000 VMIG 1* Alicia Apartments Series A 1.05% VRDO AMT 5,275,000
16,300,000 A-1+ Foothill Oaks Apartments 1.15% VRDO AMT 16,300,000
23,500,000 A-1+ Ladera Apartments Series 2-B 1.15% VRDO 23,500,000
WLCO LF Issue G FNMA-Insured:
10,100,000 A-1+ Series 2 1.10% VRDO 10,100,000
10,500,000 A-1+ Series 3 1.10% VRDO 10,500,000
See Notes to Financial Statements.
7 Smith Barney Muni Funds | 2003 Semi-Annual Report
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Schedule of Investments (unaudited) (continued) September 30, 2003
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FACE
AMOUNT RATING(a) SECURITY VALUE
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$ 13,100,000 A-1+ Orange County Housing Authority Oasis Martinique Project
1.10% VRDO $ 13,100,000
12,470,000 VMIG 1* Palo Alto USD MERLOT Series R FGIC-Insured PART
1.09% VRDO 12,470,000
16,800,000 A-1+ Paramount HFA MFH Century Plaza Apartment Project
FNMA-Insured 1.15% VRDO AMT 16,800,000
6,100,000 A-1 Paramount USD COP School Facilities Funding Program
1.10% VRDO 6,100,000
6,380,000 VMIG 1* Pasadena COP Rose Bowl Improvement Project Series 96
1.05% VRDO 6,380,000
19,675,000 A-1+ Port of Oakland Munitops Series 00-5 FGIC-Insured
PART 1.16% VRDO AMT 19,675,000
3,320,000 A-1 Puerto Rico Commonwealth PA 650 PART 1.13% VRDO 3,320,000
3,480,000 VMIG 1* Puerto Rico Highway Transportation Authority MERLOT
Series FFF MBIA-Insured PART 1.08% VRDO 3,480,000
Puerto Rico IFA MSTC PART:
10,000,000 A-1 Series 00-103 1.05% VRDO 10,000,000
11,995,000 A-1 Series 00-106 1.05% VRDO 11,995,000
Puerto Rico Industrial Tourist Educational Medical &
Environmental Control Authority:
33,630,000 Aa3* Abbot Laboratories Project 1.30% due 3/1/04 33,630,000
16,380,000 A-1+ Putters Series 235 MBIA-Insured PART
1.07% due 6/3/04 16,380,000
2,300,000 A-1 Redwood City PFA COP City Hall Project 1.10% VRDO 2,300,000
Riverside County Community Facilities District Special Tax:
11,650,000 VMIG 1* No. 88-4 1.10% VRDO 11,650,000
3,100,000 VMIG 1* No. 89-1 1.10% VRDO 3,100,000
Riverside County Housing Authority MFH:
12,600,000 VMIG 1* Amanda Park Project Series A 1.15% VRDO AMT 12,600,000
2,500,000 A-1+ Countrywood Apartments Series C 1.06% VRDO 2,500,000
Riverside County IDA:
3,300,000 A-1+ Aluminum Body Corp. Project 1.10% VRDO AMT 3,300,000
1,900,000 NR+ Rockwin Corp. Series II 1.10% VRDO AMT 1,900,000
17,175,000 A-1+ Riverside-San Bernardino HFA Lease Pass-Through Obligation
Series A 1.10% VRDO 17,175,000
23,900,000 A-1+ Sacramento County COP Administration Center & Courthouse
Project 1.03% VRDO 23,900,000
Sacramento County Housing Authority MFH:
6,000,000 A-1+ Ashford Series D FNMA-Insured 1.10% VRDO 6,000,000
5,000,000 A-1+ Stone Creek Apartments FNMA-Insured 1.10% VRDO 5,000,000
7,000,000 A-1+ Sacramento County Sanitation District Finance Authority
Series C 1.05% VRDO 7,000,000
16,940,000 A-1 Sacramento Finance Authority MSTC Series 2025
AMBAC-Insured PART 1.13% VRDO 16,940,000
11,835,000 VMIG 1* Sacramento MUD Munitops Series 03-17 MBIA-Insured
PART 1.13% VRDO 11,835,000
See Notes to Financial Statements.
8 Smith Barney Muni Funds | 2003 Semi-Annual Report
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Schedule of Investments (unaudited) (continued) September 30, 2003
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FACE
AMOUNT RATING(a) SECURITY VALUE
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San Bernardo County COP:
$ 7,600,000 A-1+ Capital Improvement Project 1.10% VRDO $ 7,600,000
9,000,000 A-1+ Medical Center Project MBIA-Insured 1.11% VRDO 9,000,000
15,160,000 SP-1+ San Diego County School District RAN 1.75% due 6/30/04 15,252,979
San Diego County Water Authority Series 1:
7,000,000 A-1+ 0.92% due 10/6/03 TECP 7,000,000
5,000,000 A-1+ 0.83% due 10/7/03 TECP 5,000,000
11,500,000 A-1+ 1.00% due 10/23/03 TECP 11,500,000
56,230,000 A-1+ San Diego HFA 1.10% VRDO 56,230,000
12,000,000 A-1+ San Diego USD MSTC SGA-120 MBIA-Insured PART
1.10% VRDO 12,000,000
10,000,000 VMIG 1* San Diego Water Munitops Series 98-10 FGIC-Insured
PART 1.13% VRDO 10,000,000
41,340,000 VMIG 1* San Francisco Airport Munitops Series 00-9 FGIC-Insured
PART 1.18% VRDO 41,340,000
9,865,000 A-1 San Francisco Building Authority Civic Center FGIC-Insured
PART 1.13% VRDO AMT 9,865,000
San Francisco City & County RDA MFH:
2,100,000 VMIG 1* Bayside Village Project Series B 1.08% VRDO 2,100,000
Fillmore Center:
6,600,000 A-1 Series A-1 1.04% VRDO 6,600,000
9,600,000 A-1 Series A-2 1.04% VRDO 9,600,000
5,750,000 A-1 Series B-2 1.06% VRDO 5,750,000
3,200,000 A-1 San Gabriel USD COP School Facilities Funding Program
FSA-Insured 1.10% VRDO 3,200,000
23,100,000 NR+ San Gabriel Valley Alameda Corridor
0.85% due 11/3/03 TECP 23,100,000
San Joaquin Transportation Authority TECP:
4,500,000 A-1+ 0.80% due 10/8/03 4,500,000
19,200,000 A-1+ 0.85% due 10/8/03 19,200,000
San Jose MFH:
3,000,000 A-1+ Almaden Lake Village Apartment Project 1.12% VRDO AMT 3,000,000
3,980,000 A-1+ Fairway Glen Series A FGIC-Insured 1.10% VRDO 3,980,000
16,050,000 VMIG 1* Kimberly Woods Apartments Series A 1.10% VRDO 16,050,000
6,280,000 VMIG 1* Santa Ana USD COP 1.05% VRDO 6,280,000
13,260,000 A-1+ Santa Clara County Financing Authority VMC Facility
Replacement Project 1.08% VRDO 13,260,000
2,200,000 VMIG 1* Santa Clara Electric Series B 1.10% VRDO 2,200,000
5,200,000 A-1+ Santa Cruz County Housing Authority 1.10% VRDO 5,200,000
Simi Valley MFH:
5,000,000 A-1+ Lincoln Wood Ranch 1.10% VRDO 5,000,000
7,800,000 VMIG 1* Shadowridge Apartments 1.15% VRDO 7,800,000
11,090,000 A-1 South Orange PFA MSTC Series 2030 FSA-Insured PART
1.13% VRDO 11,090,000
See Notes to Financial Statements.
9 Smith Barney Muni Funds | 2003 Semi-Annual Report
================================================================================
Schedule of Investments (unaudited) (continued) September 30, 2003
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
==========================================================================================================
Southern California Public Power Authority FSA-Insured:
$ 6,450,000 A-1+ Transmission-A Project 1.05% VRDO $ 6,450,000
27,700,000 A-1+ Transmission-B Project 1.05% VRDO 27,700,000
800,000 A-1 Stockton MFH Mariners Pointe Association Series A
1.10% VRDO 800,000
5,000,000 A-1+ Temecula PFA Community Facilities District Harveston
Series A 1.10% 5,000,000
13,800,000 A-1+ Torrance Hospital Authority Little Co. of Mary Hospital
1.08% VRDO 13,800,000
University of California Board of Regents Series A TECP:
17,380,000 A-1+ 0.85% due 10/8/03 17,380,000
15,000,000 A-1+ 0.85% due 10/29/03 15,000,000
6,000,000 A-1+ 0.85% due 11/7/03 6,000,000
30,000,000 A-1+ 0.90% due 2/9/04 30,000,000
10,100,000 A-1+ 0.90% due 2/12/04 10,100,000
2,300,000 A-1+ Upland Apartment Development Revenue Mountain Springs
Series 98A 1.10% VRDO 2,300,000
2,950,000 A-1+ Upland MFH Northwoods Apartments Project 1.00% VRDO 2,950,000
4,375,000 A-1+ Val Verde USD Series C 1.25% VRDO 4,375,000
10,635,000 A-1 Vallejo Capital Improvements Project 1.13% VRDO 10,635,000
11,500,000 A-1+ Vernon Electric Systems Malburg Project Series B
1.05% VRDO 11,500,000
4,300,000 VMIG 1* Walnut Creek MFH Creekside Drive Apartments 1.05% VRDO 4,300,000
2,335,000 A-1 Westminster COP Civic Center Refinance Program Series B
AMBAC-Insured 1.10% VRDO 2,335,000
8,740,000 A-1+ Westminster RDA AMBAC-Insured 1.10% VRDO 8,740,000
- ----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-- 100.0%
(Cost -- $2,350,700,227**) $2,350,700,227
==========================================================================================================
(a) All ratings are by Standard & Poor's Ratings Service ("Standard &
Poor's"), except for those identified by an asterisk (*), which are rated
by Moody's Investors Service ("Moody's").
+ Security has not been rated by either Standard & Poor's or Moody's.
However, the Board of Trustees has determined this security to be
considered a first tier quality issue due to enhancement features; such as
insurance and/or irrevocable letters of credit.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 11 and 12 for definitions of ratings and certain abbreviations.
See Notes to Financial Statements.
10 Smith Barney Muni Funds | 2003 Semi-Annual Report
================================================================================
Bond Ratings (unaudited)
================================================================================
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("Standard & Poor's") -- Rating "AA" may be
modified by the addition of a plus (+) or minus (-) sign to show relative
standings within the major rating categories.
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differ from the highest rated issue only in a
small degree.
Moody's Investors Service ("Moody's") -- Numerical modifiers 1, 2 and 3 may be
applied to each "Aa" rating, where 1 is the highest and 3 the lowest ranking
within its generic category.
Aaa -- Bonds rated "Aaa" by Moody's are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin, and principal is secure. While
the various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally strong
position of such bonds.
Aa -- Bonds rated "Aa" are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in "Aaa" securities or
fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in "Aaa" securities.
================================================================================
Short-Term Security Ratings (unaudited)
================================================================================
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety characteristics are denoted with a plus
(+) sign.
SP-2 -- Standard & Poor's rating indicating satisfactory capacity to pay
principal and interest, with some vulnerability to adverse financial
and economic changes over the term of the notes.
A-1 -- Standard & Poor's highest commercial paper and variable-rate demand
obligation (VRDO) rating indicating that the degree of safety
regarding timely payment is either overwhelming or very strong; those
issues determined to possess overwhelming safety characteristics are
denoted with a plus (+)sign.
VMIG 1 -- Moody's highest rating for issues having a demand feature -- VRDO.
MIG 1 -- Moody's highest rate for short-term municipal obligations.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to
the advent of the VMIG 1 rating.
NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's.
11 Smith Barney Muni Funds | 2003 Semi-Annual Report
================================================================================
Abbreviations* (unaudited)
================================================================================
ABAG -- Association of Bay Area Governments
AIG -- American International Guaranty
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Alternative Minimum Tax
BAN -- Bond Anticipation Notes
BIG -- Bond Investors Guaranty
CGIC -- Capital Guaranty Insurance Company
CHFCLI -- California Health Facility Construction Loan Insurance
CONNIE
LEE -- College Construction Loan Insurance Association
COP -- Certificate of Participation
CSD -- Central School District
EDA -- Economic Development Authority
EFA -- Educational Facilities Authority
ETM -- Escrowed To Maturity
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage Corporation
FLAIRS -- Floating Adjustable Interest Rate Securities
FNMA -- Federal National Mortgage Association
FRTC -- Floating Rate Trust Certificates
FSA -- Financial Security Assurance
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage Association
GO -- General Obligation
HDC -- Housing Development Corporation
HFA -- Housing Finance Authority
IBC -- Insured Bond Certificates
IDA -- Industrial Development Authority
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
IFA -- Infrastructure Finance Agency
Inflos -- Inverse Floaters
ISO -- Independent System Operator
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
MERLOT -- Municipal Exempt Receipts Liquidity Optional Tender
MFH -- Multi-Family Housing
MSTC -- Municipal Securities Trust Certificates
MUD -- Municipal Utilities District
MVRICS -- Municipal Variable Rate Inverse Coupon Security
PART -- Partnership Structure
PCFA -- Pollution Control Finance Authority
PCR -- Pollution Control Revenue
PFA -- Public Financing Authority
RAN -- Revenue Anticipation Notes
RAW -- Revenue Anticipation Warrants
RDA -- Redevelopment Agency
RIBS -- Residual Interest Bonds
RITES -- Residual Interest Tax-Exempt Securities
SWAP -- Swap Structure
TAN -- Tax Anticipation Notes
TECP -- Tax Exempt Commercial Paper
TFA -- Transitional Finance Authority
TOB -- Tender Option Bond Structure
TRAN -- Tax and Revenue Anticipation Notes
UFSD -- Unified Free School District
UHSD -- Unified High School District
USD -- Unified School District
VA -- Veterans Administration
VRDO -- Variable Rate Demand Obligation
VRWE -- Variable Rate Wednesday Demand
XLCA -- XL Capital Assurance
- --------------
* Abbreviations may or may not appear in the schedule of investments.
12 Smith Barney Muni Funds | 2003 Semi-Annual Report
================================================================================
Statement of Assets and Liabilities (unaudited) September 30, 2003
================================================================================
ASSETS:
Investments, at amortized cost $2,350,700,227
Cash 70,158
Receivable for Fund shares sold 16,340,604
Receivable for securities sold 10,794,118
Interest receivable 3,582,015
Prepaid expenses 8,647
Other assets 21,846
- --------------------------------------------------------------------------------
Total Assets 2,381,517,615
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for Fund shares reacquired 40,052,560
Payable for securities purchased 38,082,286
Management fee payable 893,142
Dividends payable 452,742
Distribution plan fees payable 64,294
Deferred compensation payable 21,846
Accrued expenses 378,990
- --------------------------------------------------------------------------------
Total Liabilities 79,945,860
- --------------------------------------------------------------------------------
Total Net Assets $2,301,571,755
================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 2,301,491
Capital paid in excess of par value 2,299,269,273
Accumulated net realized gain from investment transactions 991
- --------------------------------------------------------------------------------
Total Net Assets $2,301,571,755
================================================================================
Shares Outstanding:
Class A 2,301,488,459
-----------------------------------------------------------------------------
Class Y 2,660
-----------------------------------------------------------------------------
Net Asset Value, per share:
Class A (and redemption price) $ 1.00
-----------------------------------------------------------------------------
Class Y (and redemption price) $ 1.00
=============================================================================
See Notes to Financial Statements.
13 Smith Barney Muni Funds | 2003 Semi-Annual Report
================================================================================
Statement of Operations (unaudited)
================================================================================
For the Six Months Ended September 30, 2003
INVESTMENT INCOME:
Interest $12,464,072
- --------------------------------------------------------------------------------
EXPENSES:
Management fee (Note 4) 5,683,788
Distribution plan fees (Note 5) 1,188,231
Shareholder servicing fees (Note 5) 187,588
Custody 71,788
Shareholder communications (Note 5) 23,272
Registration fees 19,947
Audit and legal 16,488
Trustees' fees 12,055
Other 16,722
- --------------------------------------------------------------------------------
Total Expenses 7,219,879
- --------------------------------------------------------------------------------
Net Investment Income 5,244,193
- --------------------------------------------------------------------------------
Net Realized Gain From Investment Transactions 991
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 5,245,184
================================================================================
See Notes to Financial Statements.
14 Smith Barney Muni Funds | 2003 Semi-Annual Report
================================================================================
Statements of Changes in Net Assets
================================================================================
For the Six Months Ended September 30, 2003 (unaudited)
and the Year Ended March 31, 2003
September 30 March 31
================================================================================================================
OPERATIONS:
Net investment income $ 5,244,193 $ 19,311,248
Net realized gain 991 177,578
- ----------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 5,245,184 19,488,826
- ----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTES 3 AND 6):
Net investment income (5,244,193) (19,311,248)
- ----------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (5,244,193) (19,311,248)
- ----------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 4,267,943,546 7,983,425,382
Net asset value of shares issued for reinvestment of dividends 5,249,029 19,660,893
Cost of shares reacquired (4,359,762,096) (8,233,462,785)
- ----------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Fund Share Transactions (86,569,521) (230,376,510)
- ----------------------------------------------------------------------------------------------------------------
Decrease in Net Assets (86,568,530) (230,198,932)
NET ASSETS:
Beginning of period 2,388,140,285 2,618,339,217
- ----------------------------------------------------------------------------------------------------------------
End of period $ 2,301,571,755 $ 2,388,140,285
================================================================================================================
See Notes to Financial Statements.
15 Smith Barney Muni Funds | 2003 Semi-Annual Report
================================================================================
Notes to Financial Statements (unaudited)
================================================================================
1. Significant Accounting Policies
The California Money Market Portfolio ("Fund"), a separate investment fund of
the Smith Barney Muni Funds ("Trust"), a Massachusetts business trust, is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Trust consists of this Fund and eight other
separate investment funds: Florida, Georgia, Limited Term, New York, National,
Pennsylvania, Massachusetts Money Market and New York Money Market Portfolios.
The financial statements and financial highlights for the other funds are
presented in separate shareholder reports.
The significant accounting policies consistently followed by the Fund are:
(a) security transactions are accounted for on trade date; (b) the Fund uses the
amortized cost method for valuing investments; accordingly, the cost of
securities plus accreted discount, or minus amortized premium, approximates
value; (c) gains or losses on the sale of securities are calculated by using the
specific identification method; (d) interest income, adjusted for amortization
of premium and accretion of discount, is recorded on an accrual basis; (e)
dividends and distributions to shareholders are recorded on the ex-dividend
date; (f) class specific expenses are charged to each class; management fees and
general fund expenses are allocated on the basis of relative net assets of each
class or on another reasonable basis; (g) the Fund intends to comply with the
applicable provisions of the Internal Revenue Code of 1986, as amended,
pertaining to regulated investment companies and to make distributions of
taxable income sufficient to relieve it from substantially all Federal income
and excise taxes; (h) the character of income and gains to be distributed is
determined in accordance with income tax regulations which may differ from
accounting principles generally accepted in the United States of America; and
(i) estimates and assumptions are required to be made regarding assets,
liabilities and changes in net assets resulting from operations when financial
statements are prepared. Changes in the economic environment, financial markets
and any other parameters used in determining these estimates could cause actual
results to differ.
2. Fund Concentration
Since the Fund invests primarily in obligations of issuers within California, it
is subject to possible concentration risks associated with economic, political,
or legal developments or industrial or regional matters specifically affecting
California.
16 Smith Barney Muni Funds | 2003 Semi-Annual Report
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
3. Exempt-Interest Dividends and Other Distributions
The Fund declares and records a dividend of substantially all its net investment
income on each business day. Such dividends are paid or reinvested monthly in
Fund shares on the payable date. Furthermore, the Fund intends to satisfy
conditions that will enable interest from municipal securities, which is exempt
from regular Federal income tax and from designated state income taxes, to
retain such tax-exempt status when distributed to the shareholders of the Fund.
Capital gain distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
4. Management Agreement and Other Transactions
Smith Barney Fund Management LLC ("SBFM"), an indirect wholly-owned subsidiary
of Citigroup Inc. ("Citigroup"), acts as investment manager to the Fund.
Effective July 1, 2003, the Fund pays SBFM a management fee calculated at an
annual rate of 0.475% on the first $1 billion of the Fund's average daily net
assets; 0.450% on the next $1 billion; 0.425% on the next $3 billion of the
Fund's average daily net assets; 0.400% on the next $5 billion and 0.375% on the
Fund's average daily net assets in excess of $10 billion. This fee is calculated
daily and paid monthly.
Prior to July 1, 2003, the Fund paid SBFM a management fee calculated at an
annual rate of 0.50% on the first $2.5 billion of average daily net assets;
0.475% on the next $2.5 billion and 0.45% on the average daily net assets in
excess of $5 billion. This fee is calculated daily and paid monthly.
Citicorp Trust Bank, fsb. ("CTB"), another subsidiary of Citigroup, acts as the
Fund's transfer agent. PFPC Inc. ("PFPC") acts as the Fund's sub-transfer agent.
CTB receives account fees and asset-based fees that vary according to the size
and type of account. PFPCis responsible for shareholder recordkeeping and
financial processing for all shareholder accounts and is paid by CTB. For the
six months ended September 30, 2003, the Fund paid transfer agent fees of
$198,002 to CTB.
Citigroup Global Markets Inc. ("CGM"), another indirect wholly-owned subsidiary
of Citigroup, acts as the Fund's distributor.
All officers and one Trustee of the Trust are employees of Citigroup or its
affiliates.
17 Smith Barney Muni Funds | 2003 Semi-Annual Report
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
5. Class Specific Expenses
Pursuant to a Rule 12b-1 Distribution Plan, the Fund pays a service fee with
respect to Class A shares calculated at an annual rate of 0.10% of the average
daily net assets of that class. For the six months ended September 30, 2003,
total Rule 12b-1 Distribution Plan fees, which are accrued daily and paid
monthly, were $1,188,231.
For the six months ended September 30, 2003, total Shareholder Servicing fees
were as follows:
Class A Class Y
================================================================================
Shareholder Servicing Fees $187,588 $0*
================================================================================
For the six months ended September 30, 2003, total Shareholder Communication
expenses were as follows:
Class A Class Y
================================================================================
Shareholder Communication Expenses $23,272 $0*
================================================================================
* Amount represents less than $1.00.
6. Distributions Paid to Shareholders by Class
Six Months Ended Year Ended
September 30, 2003 March 31, 2003
================================================================================
Net Investment Income
Class A $5,244,185 $19,311,225
Class Y 8 23
- --------------------------------------------------------------------------------
Total $5,244,193 $19,311,248
================================================================================
7. Shares of Beneficial Interest
At September 30, 2003, the Trust had an unlimited amount of shares of beneficial
interest authorized with a par value of $0.001 per share. The Fund has the
ability to issue multiple classes of shares. Each share of a class represents an
identical interest in the Fund and has the same rights, except that each class
bears certain expenses specifically related to the distribution of its shares.
18 Smith Barney Muni Funds | 2003 Semi-Annual Report
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
Transactions in shares of the Fund were as follows:
Six Months Ended Year Ended
September 30, 2003 March 31, 2003
================================================================================
Class A
Shares sold 4,267,943,546 7,983,425,382
Shares issued on reinvestment 5,249,020 19,660,865
Shares reacquired (4,359,762,096) (8,233,462,785)
- --------------------------------------------------------------------------------
Net Decrease (86,569,530) (230,376,538)
================================================================================
Class Y
Shares sold -- --
Shares issued on reinvestment 9 28
Shares reacquired -- --
- --------------------------------------------------------------------------------
Net Increase 9 28
================================================================================
8. Subsequent Event
The Fund has received the following information from Citigroup Asset Management
("CAM"), the Citigroup business unit which includes the Fund's Investment
Manager and other investment advisory companies, all of which are indirect,
wholly-owned subsidiaries of Citigroup. CAM is reviewing its entry, through an
affiliate, into the transfer agent business in the period 1997-1999. As CAM
currently understands the facts, at the time CAM decided to enter the transfer
agent business, CAM sub-contracted for a period of five years certain of the
transfer agency services to a third party and also concluded a revenue guarantee
agreement with this sub-contractor providing that the sub-contractor would
guarantee certain benefits to CAM or its affiliates (the "Revenue Guarantee
Agreement"). In connection with the subsequent purchase of the sub-contractor's
business by an affiliate of the current sub-transfer agent (PFPC Inc.) used by
CAM on many of the funds it manages, this Revenue Guarantee Agreement was
amended eliminating those benefits in exchange for arrangements that included a
one-time payment from the sub-contractor.
The Boards of CAM-managed funds (the "Boards") were not informed of the Revenue
Guarantee Agreement with the sub-contractor at the time the Boards considered
and approved the transfer agent arrangements. Nor were the Boards informed of
the subsequent amendment to the Revenue Guarantee Agreement when that occurred.
19 Smith Barney Muni Funds | 2003 Semi-Annual Report
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
CAM has begun to take corrective actions. CAM will pay to the applicable funds
$16 million (plus interest) that CAM and its affiliates received from the
Revenue Guarantee Agreement and its amendment. CAM also plans an independent
review to verify that the transfer agency fees charged by CAM were fairly priced
as compared to competitive alternatives. CAM is instituting new procedures and
making changes designed to ensure no similar arrangements are entered into in
the future.
CAM has briefed the SEC, the New York State Attorney General and other
regulators with respect to this matter, as well as the U.S. Attorney who is
investigating the matter. CAM is cooperating with governmental authorities on
this matter, the ultimate outcome of which is not yet determinable.
20 Smith Barney Muni Funds | 2003 Semi-Annual Report
================================================================================
Financial Highlights
================================================================================
For a share of beneficial interest outstanding throughout each year ended March
31, unless otherwise noted:
Class A Shares 2003(1) 2003 2002 2001 2000 1999
=====================================================================================================================
Net Asset Value,
Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 0.002 0.008 0.016 0.030 0.025 0.026
Dividends from net
investment income (0.002) (0.008) (0.016) (0.030) (0.025) (0.026)
- ---------------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------------------------------------------------------------
Total Return 0.22%++ 0.76% 1.66% 3.03% 2.49% 2.61%
- ---------------------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (millions) $ 2,302 $ 2,388 $ 2,618 $ 3,355 $ 3,095 $ 2,136
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average
Net Assets:
Expenses(2) 0.61%+ 0.64% 0.63% 0.63 0.66% 0.64%
Net investment income 0.44+ 0.76 1.67 2.97 2.46 2.55
=====================================================================================================================
Class Y Shares 2003(1) 2003 2002 2001 2000 1999
=====================================================================================================================
Net Asset Value,
Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 0.003 0.010 0.018 0.031 0.025 0.026
Dividends from net
investment income (0.003) (0.010) (0.018) (0.031) (0.025) (0.026)
- ---------------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------------------------------------------------------------
Total Return 0.33%++ 1.02% 1.78% 3.12% 2.57% 2.60%
- ---------------------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (000s) $ 3 $ 3 $ 3 $ 3 $ 2 $ 2
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average
Net Assets:
Expenses(3) 0.53%+ 0.53% 0.54% 0.54% 0.55% 0.51%
Net investment income 0.60+ 0.87 1.72 3.06 2.58 2.68
=====================================================================================================================
(1) For the six months ended September 30, 2003 (unaudited).
(2) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 0.80%.
(3) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 0.70%.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
21 Smith Barney Muni Funds | 2003 Semi-Annual Report
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- --------------------------------------------------------------------------------
SMITH BARNEY
MUNI FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUSTEES
Lee Abraham
Allan J. Bloostein
Jane F. Dasher
Donald R. Foley
R. Jay Gerken, CFA
Chairman
Richard E. Hanson, Jr.
Paul Hardin
Roderick C. Rasmussen
John P. Toolan
OFFICERS
R. Jay Gerken, CFA
President and Chief
Executive Officer
Andrew B. Shoup*
Senior Vice President and
Chief Administrative Officer
Richard L. Peteka
Chief Financial Officer
and Treasurer
Julie P. Callahan, CFA
Vice President and
Investment Officer
Joseph P. Deane
Vice President and
Investment Officer
Kaprel Ozsolak
Controller
Robert I. Frenkel*
Secretary and
Chief Legal Officer
INVESTMENT
MANAGER
Smith Barney Fund
Management LLC
DISTRIBUTOR
Citigroup Global Markets Inc.
CUSTODIAN
State Street Bank and
Trust Company
TRANSFER AGENT
Citicorp Trust Bank, fsb.
125 Broad Street, 11th Floor
New York, New York 10004
SUB-TRANSFER AGENT
PFPC Inc.
P.O. Box 9699
Providence, Rhode Island
02940-9699
*As of November 25, 2003.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
California Money Market
Portfolio
The Fund is a separate investment fund of the Smith Barney Muni Funds, a
Massachusetts business trust.
This report is submitted for general information of the shareholders of Smith
Barney Muni Funds -- California Money Market Portfolio, but it may also be used
as sales literature when preceded or accompanied by the current Prospectus,
which gives details about charges, expenses, investment objectives and operating
policies of the Fund. If used as sales material after December 31, 2003, this
report must be accompanied by performance information for the most recently
completed calendar quarter.
SMITH BARNEY MUNIFUNDS
Smith Barney Mutual Funds
125 Broad Street
10th Floor, MF-2
New York, New York 10004
For complete information on any Smith Barney Mutual Funds, including management
fees and expenses, call or write your financial professional for a free
prospectus. Read it carefully before you invest or send money.
(C)2003 Citigroup Global Markets Inc.
Member NASD, SIPC
FD0805 11/03 03-5681
ITEM 2. CODE OF ETHICS.
Not Applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not Applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal
financial officer have concluded that the registrant's disclosure
controls and procedures (as defined in Rule 30a- 3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act")) are
effective as of a date within 90 days of the filing date of this
report that includes the disclosure required by this paragraph,
based on their evaluation of the disclosure controls and
procedures required by Rule 30a-3(b) under the 1940 Act and
15d-15(b) under the Securities Exchange Act of 1934.
(b) There were no changes in the registrant's internal control
over financial reporting (as defined in Rule 30a-3(d) under the
1940 Act) that occurred during the registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case
of an annual report) that have materially affected, or are likely
to materially affect the registrant's internal control over
financial reporting.
ITEM 10. EXHIBITS.
(a) Not applicable.
(b) Attached hereto.
Exhibit 99.CERT Certifications pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 99.906CERT Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this Report
to be signed on its behalf by the undersigned, there unto duly authorized.
Smith Barney Muni Funds
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
Smith Barney Muni Funds
Date: December 15, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
Smith Barney Muni Funds
Date: December 15, 2003
By: /s/ Richard L. Peteka
Richard L. Peteka
Chief Financial Officer of
Smith Barney Muni Funds
Date: December 15, 2003